India’s tier 2 and 3 cities emerging as new startup hubs

BANGALORE, INDIA: India’s tier 2 and 3 cities are now emerging as new hubs for startups driven largely by growth of active incubators and accelerators.

A recent NASSCOM and Zinnov report found that startups from these cities account for about 20% of total startup base in India.

Breaking away from the established convention, most of the startups from tier 2/3 cities are advanced technology based using Artificial Intelligence, Advanced Analytics, and IoT in newer sectors such as Healthcare, Agri-tech, Education, Financial Inclusion, Energy-tech and Alternate Energy. A lion’s share of the tier 2/3 startups also cater to solving the social challenges facing the country, says the report.

Another encouraging trend is further supported by the fact that around 40% of the active business incubators and accelerators are now located in non-tier 1 cities such as Ahmedabad, Pune, Jaipur, Lucknow, Chandigarh etc., making startups a pan India phenomenon. Incubators are responsible for providing support across a startup’s life cycle, while accelerators are focused more towards growth and acceleration of the startup.

The report notes that there has been an impressive 35% growth in number of incubators and accelerators being instituted in 2017 when compared to 2016. There are more than 190 active business incubators and accelerators in the country, out of which 90 are academic, while the rest are corporate, Govt. supported and private in nature.

The Government of India has instituted measures to create a conducive ecosystem by facilitating collaboration between government, industry and institutions, and addressing startup concerns through innovative and sustainable solutions. These measures have triggered the growth of incubators and accelerators in tier 2 and 3 cities, which offer low manpower cost, cheaper real estate, and more affordable amenities to young companies with limited budgets.

Traditionally, many tier 2/3 cities of India have been educational hubs which makes them ideal and plausible destinations for startup incubators and accelerators.

Many academic institutions, such as EDII, are nodal agencies for key government policies related to startups and hence are attuned to incentives and initiatives of the start-up ecosystem in India.

Sunil Shukla, Director, Entrepreneurship Development Institute of India (EDII), Ahmedabad said, “The Indian incubator and accelerator ecosystem are partnership-driven and sector-specific. Academic incubators provide a unique experience to new startups in terms of access to faculty, network of mentors, funders, entrepreneurs, industry experts, private sector and supportive work environment. They also tend to be multi-sector making them approachable for startups operating in various sectors.”